Gov. John Kitzhaber proposes to create a large state agency, the Department of Post-Secondary Education, to control state funding for the state's seven public universities, 17 community colleges, need-based college scholarships and Oregon Health & Science University.

The surprise announcement, never floated publicly before Friday, was revealed when Kitzhaber unveiled his budget plan for 2013-15.

If his plan flies, he will have personally selected all the key executives and board members running the main segments of Oregon public education: early childhood, public schools, community colleges and universities.

University System Chancellor George Pernsteiner, whose office would be cut back to help launch the new department, said he first heard about the plan just a week ago. He said it makes a lot of sense, however, and heralded its potential to improve the higher education landscape for Oregon students.

"This could provide an integrated approach to funding student success," he said.

The fact that Kitzhaber also recommended the first increase in state funding for Oregon's public universities in six years contributed to Pernsteiner's optimism, he noted.

A complex set of changes would eliminate the jobs of Oregon's community college commissioner, Cam Preus, and its Student Access Commission director. The people who report to them would get a new boss, the yet-to-be-named head of the Department of Post-Secondary Education, most likely handpicked by the governor.

The idea behind the new department, said Ben Cannon, the governor's education policy adviser, is to have a single body decide how best to divvy up higher education dollars -- for universities, community colleges and need-based college scholarships -- in a way that will yield the most good for students and taxpayers.

The vast majority of state money for higher education is distributed on a per-student basis regardless of what works. Kitzhaber has said he wants a system that does more to reward results -- such as degrees and certificates awarded, success retaining students, and graduates employed in high-paying, high-demand fields. This new department would be charged with designing such a system, Cannon said.

That could be a boon for community colleges, which require less money to get a student to earn a credential such as industry certification or an associate's degree than universities require to get a student to a degree.

The new department wouldn't cost a dime more to operate than has been spent to administer its separate pieces, Cannon said. Running community colleges and workforce development costs about $6 million in the current two-year budget, and running the scholarship commission costs nearly $2 million. Replacing those agencies' top two jobs with just one would save money, he said

The administration costs of the chancellor's office, which provides legal services, payroll operations and other operational services to all seven universities, would drop from about nearly $21 million to about $19 million to free $1.7 million for the additional university-related costs at the new department.

The department would consolidate operations that now take place in Eugene, Corvallis, Salem and Portland. Where to locate the new department and which new or existing commission would run it have yet to be decided, Cannon said.

The governor also is proposing changes at the Oregon Department of Education. That agency, headed by Kitzhaber's newly appointed state schools chief, Rob Saxton, would take control over early-childhood programs previously run by the Oregon Commission on Children and Families and subsidized child care for low-income workers now run by the Employment Department.

If the changes are approved by the Legislature, Kitzhaber will have consolidated his control over education in less than one term. He personally selected Saxton; the state's new chief education officer, Rudy Crew; all members of the Oregon Education Investment Board, which oversees education from pre-school through graduate school; and the state's new early learning director, Jada Rupley.

He would select the post-secondary education department's director and most likely name all members of the board or commission that will run it.